Company's Capitalization Growth through Marketing

One of the key questions for the Russian business community nowadays is how to attract investments to the Russian economy? How to provide foreign investors with an opportunity to evaluate company's capitalization? There are two ways to attract an investor: either with tangible or intangible assets.

Material resources of Russian companies are extremely limited. In 2004 capital depreciation by different industries was 33–60%. A complimentary resource for increasing companies' capitalization could be the land, but due to a number of legal discrepancies it is not possible to take an advantage of such a resource at present. Another asset is natural resources, but it is significant only for raw material industries. At the end, tangible assets are not a competitive advantage for a huge part of Russian companies.

As for intangible assets, which also include marketing strategy, they offer wide opportunities for economic growth. In 2002 the Research Center of RAM conducted a survey of 341 foreign companies having long and successful experience in different industries of the Russian economy. The results demonstrated that from 36 (machinery industry) to 87% (communications) of top-managers consider marketing strategy as an asset that should be taken into account while calculating company's capitalization. Respondents' answers prove that marketing strategy, as an asset, may increase Russian companies' capitalization on 11 (machinery) — 22% (commerce, wood working). Average evaluation of marketing resource for capitalization growth is 18%. Capitalization growth of the industries connected to final consumption is also highly potential (food processing — 19%, textile industry — 16% etc.).

Another research conducted in 2004 by "On conference" Company together with "E-xecutive" Managers' Community proved and detailed the earlier collected data (onconference_report.pdf, 253k, Russian version). The survey covered 298 directors of the companies. Almost 2/3 of them mentioned that investments in marketing increase business profitability. Still not everyone has a proper understanding of marketing impact on the company's market value growth. Only 37% of directors and 40% of marketers pointed out this important correlation. To a large extent it has to do with the fact that companies' directors and financial officers do not understand the language of marketing reports, they need precise and correct financial indicators, which would illustrate the recovery of expenditures on marketing.

The basic approach for the development of this work was declared in the report "Russian Company's Capitalization Growth through Realization of Marketing Instruments", presented at the Russian Union of Industrialists and Entrepreneurs (Employers) (RSPP) Board meeting (October 18, 2002) by professor Alexander Braverman, RAM President - Chairman of the Board. In the framework of this project RAM was recommended to develop professional standards for marketing audit and strategies in a format, adapted to the requirements of international investors and marketing associations.

The statements from the report were further on developed in publications and speeches of the RAM President A. Braverman ("Another Factor of Capitalization", "Capitalization of Marketing (how to turn marketing strategy into the source of capitalization)"). They were also practically implemented in realization of projects which RAM coordinated for large banks and companies, including "Lukoil", Bank "Zenit", "Bank of Moscow" etc.

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